Xcel Energy on Tuesday continued its shift away from coal, announcing an agreement to retire two of its three coal-burning units at the Comanche Generating Station in Pueblo while adding substantially more wind, solar and natural gas generation.

Xcel Energy will request competitive bids before the end of the year for 1,000 megawatts of additional wind, 700 megawatts of solar and 700 megawatts of natural gas power generation under its “Colorado Energy Plan.”

The state’s largest utility also said it will retire 660 megawatts of coal-generated power from Comanche Unit 1, built in 1973, and Comanche Unit 2, built in 1975. It will continue to operate the newer and cleaner coal-fired Unit 3, which came online in 2010 and has a capacity of 750 megawatts.

“It is really about the economics,” David Eves, president for Xcel Energy in Colorado, said of the retirements, which will take place before the end of 2022 and 2025. “From the company’s perspective, this plan is a response to our customers”

The Trump administration has made restoring coal’s prominence as a generation source and preserving mining jobs a priority. Eves said the company strongly supports “decarbonization,” but only when it makes financial sense. The decision to go with gas, solar and wind over coal, he said, wasn’t so much political as economic.

“The fundamental economics of these technologies (wind and solar) is what is making these dramatic changes possible and beneficial to consumers,” he said.

Customers are pushing Xcel for greener and lower emission energy sources, but also want reliability and lower costs, Eves said. The company thinks it has found the right formula and on Tuesday filed a stipulation to its 2016 electric resource plan that is before the Colorado Public Utilities Commission.

More than a dozen parties, including environmental groups, independent power producers, consumer advocates and most importantly, the utility itself, hammered out the agreement.

Retiring the two coal plants, besides reducing emissions, will free up capacity on the power grid to handle the new generation sources. As part of the transition, Xcel is seeking approval for a new switching station near Pueblo.

The coal burned in the two Comanche units comes from Wyoming’s Powder River Basin, which will limit any direct hit to West Slope mines. But Pueblo will see job cuts and lower property taxes, at least initially.

Xcel will need up to 90 fewer workers than the 172 people currently employed at the station, but it will try to find other jobs for those displaced employees, said spokesman Mark Stutz. Assuming gas turbines replace one of the coal units, Xcel’s property taxes, which were $19.6 million last year, could drop by $700,000 a year.

“We’ve been in discussions with Xcel for the past six weeks on their plan but still have more questions,” the Pueblo Board of County Commissioners said in a statement Tuesday. “As we negotiate with Xcel, we are laser-focused on protecting local jobs and our community’s tax base, as well as being stewards of our environment.”

Future generation sources are expected to locate mostly in the south central part of the state, along with northeastern Colorado.

“We will be asking the PUC to approve a process that in the company’s estimation will lead to $2.5 billion of clean energy investments in rural Colorado,” Eves said.

In the end, the winning arguments were market-based, said Erin Overturf, chief energy counsel with Western Resource Advocates, an environmental group focused on utility issues.

Tax credits that support the construction of wind and solar plants are phasing out, leaving a limited window to take advantage of them. Many independent power projects already on the drawing board could plug into the plan and qualify for the tax credits.

“We are confident that the competition that will ensue will bring on cost-competitive projects that will benefit ratepayers,” said Mark Detsky, an attorney representing the Colorado Independent Energy Association.

Xcel has agreed to not own more than half of the new renewable generation sought and 75 percent of the natural gas generation, assuming it can outbid independent producers. And if the bids leave Comanche coal-generation as the lowest cost alternative, then those units will stay in operation.

Eves expects the competitive bidding process will lower electricity costs for customers, even after accounting for the expense of retiring the two Comanche units 10 years early.

To help protect ratepayers, the plan will seek to cut a 2 percent surcharge charged as part of the state’s renewable energy mandate to 1 percent, most likely by 2021 or 2022.

But the plan faces opposition from Republican lawmakers and coal advocates who argue Xcel is replacing an affordable and dependable power source with heavily subsidized and unreliable alternatives.

“Renewable energy providers in Colorado already profit from a wide variety of special preferences and handouts, including some of the highest renewable energy mandates in the country, but apparently that’s not enough for one utility, which is pulling a bit of a fast one by going to the PUC for something it couldn’t get passed through the legislature last session,” said Jerry Sonnenberg, president pro-tem of the State Senate and chairman of the Agriculture, Natural Resources and Energy Committee.

Last year, Xcel generated 46 percent of its electricity from coal, 25 percent from natural gas, 23 percent from wind and the remainder from solar and hydropower sources. Under the plan, the share of renewables would rise from 29 percent currently to 55 percent by 2025, Eves said.

Aldo Svaldi has worked at The Denver Post since 2000. His coverage areas have included residential real estate, economic development and the Colorado economy. He's also worked for Financial Times Energy, the Denver Business Journal and Arab News.

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